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Digital money is spearheading the next wave of public financial management reforms in East Asia Pacific

Khuram Farooq's picture
A herder boy in rural Mongolia. Photo: Khasar Sandag / World Bank

Use of digital money increasingly dominates the public financial management (PFM) reform priorities of most governments in the East Asia Pacific region, according to key findings of Public Expenditure Management Network in Asia – Treasury Community of Practice workshop held in Bangkok in March. 

South Korea leads this trend, although China, Indonesia, Vietnam, Philippines, and Mongolia are at various stages of implementing and expanding the use of digital money to transform government payments, disbursements and receipt systems.

Traditionally, governments have made payments through checks or cash. Strengthening this process to ensure budget compliance and improving efficient cash management was the key focus in most of these economies during the earlier phases of PFM reforms.

Over time, checks and cash payments were reduced or eliminated as the banking sector developed and electronic fund transfer mechanisms gained ground. Many advanced economies in the region have passed this stage and are now focused on gaining additional operational efficiencies and transparency by reducing the use of cash where electronic fund transfer is not feasible.

Such scenarios include travel payments to employees to pay for their lodging, travel, and incidentals. Also, disbursements to pay citizens social benefits, subsidies and other relief payments are often a challenge when many of the beneficiaries do not have bank accounts or access to banking services because they live in remote areas.

In addition to payments, policy makers also are focused on how to facilitate payments made by citizens including taxes and fees. The use of digital money is leading the way to address challenges, and the key priority among many policy makers in the East Asia Pacific region. Issuance of credit cards to government employees is the dominant trend, although debit cards and mobile money options are also being implemented in a number of countries. Here are some highlights of initiatives:

  • Cambodia has collaborated with a local institution that provides mobile banking services to facilitate payroll payments to civil servants as well as to enable more timely and easy payments by citizens for government services. Expansion of these services is planned over the next few years.
  • China currently issues credit cards by the millions to government employees for their travel needs. They plan to enhance the use of credit card going forward, by further improving mechanisms and policies, including negotiation with credit card vendors/banks to reduce user fees, increasing the POS (Point of Sale) equipment, arrange with line ministries policies and regulations to ensure reasonable credit card usage and controls. Peer learning from Korea remains an option.
  • Indonesia has piloted the use of credit card for government transactions (payments and receipts). They plan to expand the pilot by completing studies and peer learn from China to draft regulations and build electronic monitoring systems. The target is to expand the pilot from 2017 through early 2018.
  • The Philippines plans to use debit cards to disburse aid to citizens in remote areas. They plan to complete joint accreditation of the government and the banks and select stores where cardholders can present their debit cards to purchase goods. The concept of providing a single card for all types of assistance for one family is in the plans based on the experience and success in Indonesia. The target is to complete these efforts by early 2018.
  • Vietnam is planning to expand the use of credit cards to 3 large cities and roll out the POS equipment at district treasuries by June 2017.
  • Mongolia plans to pilot the use of credit cards for travel expenditures during 2018. In order to achieve the target, fiscal banking laws are being reformed, and experience from other member countries is being considered in their project design and implementation.
  • Thailand is planning to implement a social welfare e-payment system by the end of 2017 through early 2018.
Marketplace of reform ideas
Participants brainstormed and exchanged ideas during workshop sessions.
The Marketplace for reform ideas, one of the segments of the workshop, was a hit. Delegations from the participating counties displayed their reforms through ‘reform stalls’. Participants visited these stalls in a speed-dating format to discuss and learn more about a particular innovation. Presenting 12 case studies over an interactive two-hour session with free flow of knowledge exchange among participants, was an efficient way to interact with peers. 

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